March 21 (Bloomberg) -- Microsoft Corp., the world’s
largest software maker, said its Windows Phone operating system
will propel it past Apple Inc. in China’s smartphone market as
its partners release devices costing as little as $158.

Passing Apple is an “interim goal” as the company’s
longer-term objective is to supplant Google Inc.’s Android as
the local market leader, Simon Leung, Microsoft’s chairman and
chief executive officer for the Greater China region, told
reporters in Beijing today. He didn’t give a time frame for
reaching the targets.

China is poised to become the world’s biggest smartphone
market in 2012, making it crucial for manufacturers and sellers
in the battle for sales. Shipments of the devices, used to
download games and movies, will jump 52 percent to 137 million
units in China this year, allowing the country to overtake the
U.S. for the first time, research company IDC said.

“We will continue to drive the price down,” Leung said.
“Our goal is number one. Having a goal to be number two is not
really a goal.”

Microsoft’s manufacturing partners will “definitely”
offer devices in the price range of 1,000 yuan ($158), Leung
said, without specifying which partners or devices would meet
the target. Rather than make its own phones, Microsoft supplies
software to handset manufacturers including Nokia Oyj, Samsung
Electronics Co., HTC Corp. and ZTE Corp., Leung said.

Developing Markets

Leung, who spoke before a ceremony to unveil the new
Windows Phone 7.5 operating system in China, declined to discuss
specific handsets using the system.

A post on Microsoft’s Windows Phone Blog said that HTC has
started selling the first Windows Phone in the country. The HTC
Eternity is an unlocked handset with a 4.7-inch screen, front-and rear-facing cameras, and comes with popular Chinese apps,
the blog said, without giving the price for the handset.

Widening Reach

Microsoft plans to bring its Windows Phone software to 23
more countries for a total of 63 and put the operating system on
less expensive smartphones, it said last month. The company aims
to move quickly in developing economies, where Google and Apple
are less dominant, before cheaper Android phones can strengthen
Google’s position.

Windows Phone will account for 7.5 percent of the China
market this year, trailing the 12 percent share of Apple’s IOS
and Android’s 70 percent, said Teck-Zhung Wong, a Beijing-based
analyst at IDC. By next year, Windows share will rise to 15
percent, surpassing Apple’s 13 percent, while still trailing
Android’s 66 percent, he said.

“The Windows Phone ramp-up in China won’t really begin
until the second quarter, so the numbers are still low,” Wong
said. “From next year the ramp-up will be more rapid.”

By 2016, Windows Phone is forecast to have a 20 percent
share in China, ahead of Apple’s 16 percent and trailing
Google’s 60 percent, Wong said.

‘Fresh Proposition’

Windows Phone will gain market share from Apple because it
represents a “fresh proposition” as an alternative and will
also feature in a wider range of devices, Wong said.

“Windows Phone will have a lot of equipment manufacturing
partners and more device choice at more different price
points,” Wong said. “That alone, as opposed to what Apple is
doing, will give Windows Phone an advantage.”

Sandy Shen, a Shanghai-based analyst with Gartner Inc. said
Microsoft will have to fight against the prevalence of iPhone
and Android devices at the high-end of the market.

“It will take a while before people appreciate the
offering,” Shen said. “It’s never too late for a really good
product, but there are still improvements to be made on the
Windows Phone device itself and to establish the ecosystem.”

Microsoft is exploring the possibility of opening its own
retail stores in the country, Leung said today.

He also said he met with senior Chinese leaders yesterday
to discuss the nation’s ban on game consoles, including
Microsoft’s Xbox, without making any progress.